Should You Rent or Buy

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How’s it going everybody this is pete the bush today i’m gonna talk about if you should rent a place or buy your own home now if you have the option to do either one this can be a very difficult situation so in this video i’m going to lay out some of the things that you should consider so that you can decide one or the other this video is sponsored by zent lee which

Is a free app for renters that acts like a personal assistant that deals with the landlord for you typically a renter needs to deal with the landlord once in a while maybe you need to get something fixed you need to pay the rent or you can do is take all this delegate to the app the app will follow up for you saving you a lot of time this app is free for download

And use for the renters and you can use it to pay rent every single month it will send out a check for you to the landlord you’ll also come through your credit card transactions if you want it to and allow you to split bills easily with your roommates if you have any you can even send fix-it requests to your landlord and you can follow up through this app and if you

Wanted to it will even look through all your bills and offer you cheaper alternatives now simply is only available in the united states right now and one lucky person that pays their rent throws ently through this free app it’s going to win one free month of free rent before i get too deep into the pros and cons of renting versus buying i like to just kind of give

A brief overview of the whole thing and what i really think about all this basically i personally benefited a lot from buying my own place this place right here i’ve gained an enormous amount of net worth through it and almost every single person that you ask that owns a home will have had their net worth appreciated by a large amount now this is not always true if

You bought right before the housing crash in oh wait and then you saw a plummet way down then of course yeah you’re not going to be better off strictly speaking i think it’s actually better to own a home about 95 percent of the time it really depends on the market that you’re in now currently this is 2017 the housing market has recovered greatly from before and

Sometimes it’s at its all-time high right now so to me i can possibly go and buy yet another place but i don’t really want to because i see this as a very elevated risk now you do need somewhere to live sometimes if you plan to live in it for a long duration then may not be so bad to buy even now because the price could potentially dip a lot but then it’ll just

Get back right to where it was before in a few years time so that’s why i’m saying if you plan to keep it for five ten years then you could be able to buy it right now and even if there’s a large downturn if you’re able to keep on paying the mortgage payments you should be okay in terms of trying to keep as much net worth as possible now however if you only plan

To keep it for a few years right now i feel like there’s an elevated risk right now it’s very very high it’s very very expensive now let’s talk about renting a little bit and what’s good about it well you don’t have a place that ties you down you can essentially pick up everything if you don’t have that much possessions then you can just take it wherever you go

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You can just go oh i’m gonna live on the east coast oh fine and then maybe like two months later you want to live on the west coast you can move as much as you want basically and if you own your own home it’ll be that much harder to move from one place to another because you have to sell it you incur all this real estate transaction fees of up to six percent and

Not to mention you’re gonna have all this furniture that you need to either get rid of or maybe you need to pay a lot of moving costs to move from one place to another rent prices on the other hand just keeps on going up along with the market if you’re in a market where the rent just keeps on stepping up a little steps one year later you’re gonna see oh yeah it’s

Another you know five hundred dollars or something you just see it keep on rising however if you have a mortgage if you get a fixed-rate mortgage even if you have the same exact price for the mortgage versus the rent your mortgage is gonna stay flat and then your rent is just gonna inch up a little bit every single year so what you’re gonna end up seeing is even

If your mortgage is just a tiny bit higher than your rent in a few years time you’re gonna see your mortgage less than the comparable rent now when you’re renting you possibly have all these appliances that are usually you know just kind of the low end quality stuff you can’t just buy nice things for yourself sometimes it will break you have to call the landlord

You have to wait for them to come fix it you can’t just you know do go in and do it yourself of course like i said with a sponsor if it’s taking you too much time to contact that landlord you could use that zen plea app now everybody talks about whenever you pay rent all this money is essentially gone okay you pay it you don’t get any of it back you don’t even

Get one dollar back all of this goes into your landlords pocket now if you have a mortgage of the same exact price part of it it’s gonna go into the principal now if you accelerate your payments a lot quicker early on you’re gonna have more and more of the principal applied to the home itself which means you’re increasing your net worth you can say oh most of the

Interest is going to the banks anyway but let’s say you’re paying 4% interest after you get all these homeowner deduction things like that is effectively about 3% so you take off 25% of whatever that you’re paying so four percent goes to three percent that’s effectively about how much that comes out of your pocket that you’re not getting back so this three percent

Goes into the bank’s pockets i see a lot of comments saying they’d rather take all that down payment money they would have put in a house and then invested instead now if you took this down payment and plop it all into an smp 500 etf fund for the last seven years you’re going to get 14% game the first year 12 percent 1.3 percent 14 percent and then 32 percent 16

Percent 2.1 percent and then 15 percent this average is about 13.3% every single year just for the last seven years i know i’m kind of cherry-picking data here but this is a good comparison just for the short term on the other hand let’s say you put a hundred k downpayment into a home and the home is valued at $500,000 this is a 20% down the price fluctuation on

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This home is going to be based on the $500,000 so if let’s say one year it goes up 20% or one year it goes down 20% you’re essentially going to immediately gain double your initial down payment or lose your whole initial down payment now this home that you see in the background has done me very very well it’s earned way way more than thirteen point three percent

Compounded annual growth great in fact it’s more than double this so this is kinda cherry-picking data because i’m picking the best years of the last seven years is really really good the last seven years to compare the growth rate of this home versus growth rate of the smp now i have to note that the 2017 home prices have basically stayed flat if it stays flat

You know for another two years or something it’s going to change the average quite a bit now there’s another thing about owning a home and you can’t really look at the paper gains here if you live in a home and you just look at the market value of it you can’t really spend it you you live in it you can’t take the money out and then go buy something with it you can

Only take it once you moved in to somewhere that’s lower costs so you can’t even just sell your current place and then move you know down the street or something because you still have to buy something that is similarly priced you could of course downsize and move to something smaller and take the excess or you can take all this money that you sell from your house

And move to somewhere that’s lower cost of living however you have to be aware that if you do something like this it’s like a once-in-a-lifetime thing because once you move to a lower cost of living area you’re likely going to not earn all that much anymore so the prices of where you move from it’s going to outpace the prices of where you move to therefore making

It all that much harder to move back if you ever wanted to now for rent if you do not pay your rent you’re eventually going to get evicted but for your home you think you have a large payment down in it so then you have a lot invested you think that if you do not pay you know like a month or two of mortgage yeah there might be some leeway but it’s really not like

This if you forget to pay your mortgage eventually within i think about sixty days they have the legal right to go and sell your home for you and it may be at a greatly reduced cost because generally they don’t really care how much do you get for it they just want someone to buy it really really quickly so maybe they might sell it for like 20% below market value

As long as a bank gets their money back they’re happy they don’t really care if you know they lose a bunch of your money so in the end what can you make of this do you buy or should you rent like i said before it’s mostly good to buy long-term so this is something that you can rely on about 95% i feel you can just buy into it as long as you live in it as long as

You stay in it for a long time however if you go into buying for less than five years you’re essentially going in blind you have no idea what the real estate market is gonna do i certainly don’t know what’s gonna happen so suddenly a $500,000 home you put in a hundred thousand dollars of down payment suddenly becomes four hundred thousand dollars which means you

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Have zero equity and left in it and basically this 100 thousand dollars that you put in completely evaporated this is like a hundred percent loss this is because you’ve essentially leveraged your money so much that a normal price movement as little as twenty percent will completely wipe out your initial down payment completely so should you buy or should you rent

It’s kind of like asking someone you know at the peak of 2001 calm bubble oh should you buy into the stock market or should you sell like in the moment no one really knows but my gut feeling for short-term wise is that yes it is a little bit heated right now everybody’s gonna say oh it’s not heated people you know are just gonna keep on buying it there’s low interest

Rate it’s just gonna keep on going up realtors by the way are always gonna tell you this they always go oh yeah this is gonna keep on going up because they want to sell you the home now some people have the foresight to see that oh my gosh prices are so high sometimes they sell their home okay and then they take all that money and they just stash it somewhere okay

Just keep it in cash or whatnot and then they go rent okay and then they rent for two three years they don’t care because they have this whole big chunk of money just sitting in the bank so they just rent and then they wait for the market prices to fall down okay it falls down by i don’t know like 30 40 percent and then they go you pee all the prices are low okay i’m

Gonna take a portion of what they initially sold and then rebuy and then all of a sudden two three years later they have a similar home and yet they have you know couple thousand dollars more in cash sitting in the bank maybe they didn’t even have to work all they have to do is do this very very smart move of selling at the high and then rebonding back at the low

But who can exactly predict this not many people can i hope you enjoyed this way of thinking about either buying or renting basically i’m saying go ahead buy or long term short term i don’t know don’t forget to give me a like on this video comment down below let me know if you are a buyer in this market or a renter if you’re interested in supporting this channel

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Transcribed from video
Should You Rent or Buy By BeatTheBush

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